This error message normally means that your SQL Server has been configured to operate in "Windows Authentication Mode (Windows Authentication)" and doesn't allow the use of SQL accounts.
I guess you'll have to change the Authentication Mode of the SQL server from "Windows Authentication Mode (Windows Authentication)" to "Mixed Mode (Windows Authentication and SQL Server Authentication)".
If you want to use a "native" SQL Server user you'll have to change the server to Mixed Authentication.
It appears that Perfmon is not running under the credentials you specified, but as Network Service instead.
To solve this the service must run as a Windows user that has SQL Server credentials associated.
You can find some further information in this thread on a Microsoft discussion board.